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Art. 1305. A contract is a meeting of minds between In case of breach, the The usual remedy is a civil
two persons whereby one binds himself, with respect remedy available is to action for legal separation or
to the other, to give something or to render some institute an action against a criminal action for adultery
service. the other party for or concubinage
damages.
From the book of Jurado, contract was derived
from the word “cum traho” which means an agreement or Both Jurado and Tolentino explained the
convention. However, do not be misled that contract is difference between a contract and a perfected and an
synonymous with convention because the latter is broad imperfect promises. Perfected promise merely tends to
enough to include any kind of agreement which may insure and pave the way for the celebration of a future
create, extinguish or modify patrimonial and even family contract while an imperfect promise is a mere unaccepted
relations while contract is limited to only those which offer.
create patrimonial obligations.

Class Notes:  Auto-Contract

The definition of contract provided in the above It is a kind of contract in which only one person acted in
article seems to be incomplete. This is so because: behalf of the other party and himself or another person in
1. It only covers consensual contracts another capacity to establish a contract. Tolentino said that
2. It does not deal with the concept of formal in order that a contract be existing, it requires two parties
contracts and not two persons, two declaration of wills and not two
3. It only refers to unilateral contracts wills.
4. It refers to contracts that only create obligations  Ex. Art. 18901 in Agency
and not those that extinguish
Elements of contract:
Sanchez Roman, on the other hand, defined a. Essential – are those without which there can be
contract as “a juridical convention manifested in legal form, no contract
by virtue of which one or more persons bind themselves in • Common – the consent of the
favor of another or others, reciprocally, to the fulfilment of a contracting parties, object or the
prestation to give, to do, or not to do.” subject of the contract and cause of the
obligation
Note: Not all agreements constitute contracts. But all
• Special – this is only present in certain
contracts constitute an agreement.
contracts such as delivery in real
contracts or form in solemn ones.
In order to further understand the concept of
contract, Jurado distinguished an ordinary contract from a • Extraordinary – peculiar to a specific
marriage contract: contract, such as the price in a contract
of sale.
ORDINARY CONTRACT CONTRACT OF
MARRIAGE b. Natural – those which are derived from the
Parties may be two or more Necessary that the parties nature of the contract and ordinarily accompany
persons of the same or must be one man and one the same. It is presumed by law, but it also be
different sexes. woman. excluded by the contracting parties if they so
desire.
The nature, consequences Nature, consequences and
and incidents of the contract incidents are governed by
c. Accidental – are those which only exist when the
are primarily governed by law
parties expressly provide for them for the
the agreement of the
purpose of limiting or modifying the normal
parties.
effects of the contract. (ex. Conditions, terms or
Once executed, the result is Once executed the result is
modes)
a contract. a status.
It can be terminated or It cannot be terminated by 1
Art. 1890: If the agent has been empowered to borrow
dissolved by mere mere agreement.
money, he may himself be the lender at the current rate of
agreement of the parties. interest. If he has been authorized to lend money at interest,
he cannot borrow it without the consent of the principal.
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necessary as a preliminary step towards the

CHARACTERISTICS OF A CONTRACT celebration of another subsequent contract
1. Obligatory force / character of contracts – b. Principal – those which can subsist
(Arts. 1159, 1308, 1315 and 1356) independently from the other contracts and
- It refers to the rule that once the contract is whose purpose can be fulfilled by themselves.
perfected, it shall be of obligatory force upon both c. Accessory – those which can exist only as a
parties. They are bound not only to the fulfilment consequence of, o in relation with, another prior
of obligations but also to all the consequences. contract.

2. Mutuality of contracts – (Art. 1308 and the 2. According to their perfection:

nature of contract) a. Consensual – those which are perfected by the
- It refers to the position of essential equality that is mere agreement of the parties.
occupied by both contracting parties. The b. Real – those which are require not only the
contract must be binding upon both parties and consent of the parties for their perfection, but
its validity or compliance cannot be left to the will also the delivery of the object by one party to the
of only one party.2 other.
3. Autonomy of contracts – (Art. 1306)
- The contracting parties may establish 3. According to their form:
agreements provided it is not contrary to law, a. Common – those which require no particular
public order, morals, good customs or public form
policy.3 b. Special – those which require some particular
form
4. Relativity of contracts – (First paragraph of Art.
1311) 4. According to their purpose:
- Contracts take effect only between parties, their a. Transfer of ownership
assigns and heirs. b. Conveyance of use
- Exception: c. Rendition of services
a. In case where the rights and obligations
arising from the contract are not transmissible by 5. According to their subject matter:
their nature or by stipulation or by provision of a. Things
law. b. Services

STAGES OF CONTRACTS 6. According to the nature of the vinculum which

1. Generation – it comprehends the preliminary or they produce:
preparation or conception. It is the period of a. Unilateral – those which give rise to an
negotiation and bargaining. obligation for only one party
2. Perfection – it is the moment when parties come to b. Bilateral – those which give rise to reciprocal
agree on the terms of the contract obligations for both parties
3. Consummation – it is the fulfilment or performance of
the terms agreed upon in the contract. 7. According to their cause:
a a Onerous – those in which each of the parties
CLASSIFICATION OF CONTRACTS aspires to procure for himself a benefit through
the giving of an equivalent or compensation
1. According to their relation to other contracts: a a Gratuitous – those in which one of the parties
a. Preparatory – those which have for their object proposes to give to the other a benefit without
the establishment of a condition in law which is any equivalent or compensation.
2
Art. 1308: The contracts must bind both contracting parties; 8. According to the risk involved:
its validity or compliance cannot be left to the will of one of a. Commutative – those where each of
them. the parties acquires an equivalent of
3
Art. 1306: The contracting parties may establish such his prestation and such equivalent is
stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, pecuniarily appreciable and already
morals, good customs, public order, or public policy. determined from the moment of the
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celebration of contract. good customs.

b. Aleatory – those where each of the d. Public Order – public weal, peace, safety, and
parties has to his account the health of the community.
acquisition of an equivalent of his e. Public Policy – broader in scope than public
prestation, but such equivalent is not order; it is defined as a principle of law which holds that
yet determined at the moment of no person can lawfully do that which has a tendency to
celebrationj of contract. It depends be injurious to the public or against the public good; all
upon the happening of an uncertain those considerations which are moved by the common
event. good.

9. According to their names or norms regulating

them: 2. In cases of social legislation in relation to pursuance
a. Nominate – those which have their own of social justice
individuality and are regulated by special  E.g. in labor contracts; that which is more
provisions of law. favoured to those who are needy are more
b. Innominate – those which lack individuality and favoured in the pursuit of social justice
not regulated by special provisions of law. 3. Contract of adhesion: where only one of the parties
prepared the contract and would favour the other party
who did not prepare
Art. 1306. The contracting parties may establish such  In case of doubts in the interpretation of the
stipulations, clauses, terms and conditions as they provisions, that which is more favourable to the
deem convenient, provided they are not contrary to party who may not have the position to impose
law, morals, good customs, public order, or public agreement is more appreciated
policy.

 Autonomy characteristic of contracts

– the right of the contracting parties to establish Art. 1307. Innominate contracts shall be regulated by
any stipulation, clause, term or condition as they deem the stipulations of the parties, by the provisions of
convenient. Titles I and II of this Book, by the rules governing the
most analogous nominate contracts, and by the
Limitations: customs of the place.
1. Stipulations must not be contrary to law, morals,
good customs, public order, public policy Kinds of innominate contracts:
a. Law a. Do ut des – I give and you give. (Illustration – A
 those which are mandatory or prohibitive in will give one thing to B, so that B will give another
character thing to A)
 those which impose essential requisites b. Do ut facias – I give and you do (Illustration – A
without which the contract cannot exist. will give something to B, in order that B may do
 those, without being mandatory, are something for A)
expressive of fundamental principles of justice c. Facio ut des – I do and you give (A binds himself
 only serve as suppletory to the stipulations to do something for B, so that B will give
or the will of the parties. something to A)
b. Morals – Tolentino said that it means those d. Facio ut facias – I do and you do (A will do
generally accepted principles of morality which have something for B, so that B will do something for
received some kind of social and practical confirmation; A)
synonymous to good customs. What rules govern innominate contracts?
c. Good customs – Jurado acknowledged the 1. stipulation of the parties
possible overlapping of the concept of good customs 2. provisions of Title I (Obligations) and II (Contracts) of
and good morals. But he gave a distinction, he said that Obligations and Contracts
if a moral precept or custom is not recognized 3. rules governing the most analogous nominate contracts
universally but is sanctioned by the practice of a certain 4. customs of the place
community, then it shall be included within the scope of
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Art. 1308. The contract must bind both contracting characteristic of contracts)
parties; its validity or compliance cannot be left to the
will of one of them. Exceptions:
• Mutuality characteristic of contracts 1. According to the first paragraph, the rule is not
The binding effect of the contract on both parties is applicable if the rights and obligations arising from the
based on the principle that obligations arising from contract are not transmissible:
contracts have the force of law between the contracting • By their nature
parties and that there must be mutuality between the • By stipulation
parties based on their essential equality. • By provision of the law
Rationale: to maintain the enforceability of contracts Examples:
Purpose: To render void a contract containing a condition • Agency, which is based on the confidence
which makes its fulfilment dependent exclusively upon the reposed by the principal on the agent, is not
uncontrolled will of one of the contracting parties. transmissible to the heirs of the agent.
• When a person by agreement is required to do
General Rule on Unilateral Cancellation: No one may be
something personally
permitted to change his mind or disavow and go back upon
his own acts, or to proceed contrary thereto, to the
Cases when contract may affect third persons:
prejudice of the other party.
a. when the parties transfer to third persons the rights
they acquired under the contracts
* The termination of the contract may be left to the will of
b. when the contract contains a stipulation in favor of a
one of the parties in the negative form of rescission is that
third person
is so expressly stated in the contract. Reason: Since the
c. when third persons exercise the subrogatory action or
termination is in the contract, then it would not be a
rescissory action
violation but it would be in the fulfilment of the agreement
d. in suspension of payments and compositions under the
of the parties to the contract.
Insolvency Law
e. In labor contracts of collective bargaining under RA
Art. 1309. The determination of the performance may
No.875
be left to a third person, whose decision shall not be
f. In contracts creating real right
binding until it has been made known to both
contracting parties.
Stipulation pour autrui – it is a stipulation in a contract
Art. 1310. The determination shall not be obligatory if it
clearly and deliberately conferring a favor upon a third
is evidently inequitable. In such case, the courts shall
person who has a right to demand its fulfilment provided he
decide what is equitable under the circumstances.
communicates his acceptance to the obligor prior to its
revocation.
Art. 1311. Contracts take effect only between the
parties, their assigns and heirs, except in case where
Kinds:
the rights and obligations arising from the contracts
1. Those where the stipulation is intended for the
are not transmissible by their nature, or by stipulation
sole benefit of a third person
or by provision of law. Their heir is not liable beyond
2. Those where an obligation is due from the
the value of the property he received from the
promise to the third person which the former
decedent.
seeks to discharge by means of such stipulation.
If a contract should contain some stipulation
Requisites:
in favor of a third person, he may demand its fulfilment
provided he communicated his acceptance to the • There must be a stipulation in favor of third
obligor before its revocation. A mere incidental benefit persons
or interest of a person is not sufficient. The contracting • That the stipulation in favor of a third person
parties must have clearly and deliberately conferred a should be a part of the contract and not the entire
favor upon a third person. contract
• That the contracting parties must have clearly and
General Rule: The contract is only binding between the deliberately conferred a favor upon a third person
contracting parties, their assigns and heirs. (relativity • The favourable stipulation should not be
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conditioned or compensated by any kind of intended to defraud them.

obligation  is considered an exception to the relativity of contracts
• That the person must have communicated his  creditors, who are not parties to the contract, may
acceptance to the obligor prior its revocation. interfere in the same through a rescissory action when
• Neither of the contracting parties bears a legal such contract should prejudice their rights.
representation or authorization of the third party.

Test of Beneficial Stipulation Art. 1314. Any third person who induces another to
To constitute a valid stipulation pour autrui, it violate his contract shall be liable for damages to the
must be the purpose and intent of the stipulating parties to other contracting parties.
benefit the third person, and it is not sufficient that the third
person be incidentally benefited by the stipulation. So in Interference in Contracts by third persons
order to determine whether or not such stipulation exists, - an injured party may recover damages for unlawful
one needs to rely upon the intention of the parties as interference with the contract by a third party who has
disclosed by their contract. induced one of the parties of the contract to violate the
terms thereof.

Rights of the parties Requisites:

*The third person after acceptance has the rights of a party 1. Existence of a valid contract
to the contract, and therefore may sue either for specific 2. Knowledge on the part of the third person of the
performance or resolution, with indemnity for damages. existence of the contract
3. Interference by the third person without legal
Art. 1312. In contracts creating real rights, third person justification or excuse
who come into possession of the object of the contract
are bound thereby, subject to the provisions of the Liability of the contracting party & third person  joint
Mortgage Law and the Land Registration Laws. and solidary

Contracts creating real rights – the right created directly

affects the object of the contract and it follows the same Art. 1315. Contracts are perfected by mere consent,
who ever comes into the possession of such property and from that moment the parties are bound not only
Example: a mortgage to the property follows the property to the fulfilment of what has been expressly stipulated
wherever it goes, and whether the party is aware of the but also to all the consequences which, according to
mortgage or not. their nature, may be in keeping with good faith, usage
and law.
*Although the contract may create a real right, it may not  Consensual contracts
affect a third person who comes into possession of the
property if the land and affected by such real right is Consensual contracts – perfected by mere consent and
registered under the Mortgage Law or the Land that from that moment on the juridical ties between the
Registration Laws, and the real right in question is not parties arises.
recorded in the Registry of Property.

Real contracts – those which are perfected by the delivery Art. 1316. Real contracts, such as deposit, pledge and
of the property in question. commodatum, are not perfected until the delivery of
the object of the obligation.
Real right – a right belonging to a person over a specific  Real contracts
thing, without a passive subject individually determined,
against whom such right may be personally enforced. Perfection of contract - refers to that moment in the life
of a contract when there is finally a concurrence of the wills
of the contracting parties with respect to the object and the
cause of the contract.
Art. 1313. Creditors are protected in cases of contracts
Real contracts, when perfected – by the delivery of the
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thing or object of the obligation CHAPTER 2

ESSENTIAL REQUISITES OF CONTRACTS
Art. 1317. No one may contract in the name of another
without being authorized by the latter, or unless he has General Provisions
by law a right to represent him.
Art. 1318. There is no contract unless the following
A contract entered into in the name of requisites concur:
another by one who has no authority or legal (1) Consent of the contracting parties;
representation, or who has acted beyond his powers, (2) Object certain which is the subject matter of
shall be unenforceable, unless it is ratified, expressly the contract;
or impliedly, by the persons in whose behalf has been (3) Cause of the obligation which is established.
executed, before it is revoked by the other contracting
party.
• Consent
Rule: No person may enter into a contract in the name of • Object essential common elements
another unless he has been duly authorized by the • Cause
person represented or he has by law a right to represent
him.
essential common elements  those elements which
Effect if the contract entered into in the name of are found in all contracts, otherwise there can be NO
another is without the authority of the latter either contract.
given by law or by the person involved
= contract is NOT ENFORCEABLE Essential elements of a contract:
= exception: unless it is ratified, expressly or impliedly, by 1. Essential common – those which are found in all
the person in whose behalf it has been executed before it contracts
is revoked by the other contracting party 2. Essential special or essential proper – those which
exist only in certain classes or groups of classes
Unenforceable contracts  cannot be sued upon before - E.g. delivery in real contracts; form in formal
ratification; the defects therein are permanent in nature and contracts
will exist as long as it has not been ratified. 3. Essential very special – those which are necessary for
a particular contract
Effects of Ratification - E.g. price in contracts of sale
Once ratified, the contract can be sued upon. Effects
retroact to the time of its celebration. Section 1. – Consent
 Act is validated from the moment of the celebration of
the contract and not merely from the time of its ratification. Art. 1319. Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause
*The unauthorized contract produces a state of suspense; which are to constitute the contract. The offer must be
its effectivity depends upon its ratification. If the contract is certain and the acceptance absolute. A qualified
not ratified by the person represented, the representative acceptance constitutes a counter-offer.
becomes liable in damages to the other party, if he did not Acceptance made by letter or telegram does
give notice of the absence or deficiency of his power. This not bind the offerer except from the time it came to his
liability is based on the fact that having represented himself knowledge. The contract, in such a case, is presumed
as having authority to act for another, he is responsible for to have been entered into in the place where the offer
the truth of such affirmation. was made.

Consent
 from the Latin word cum sentire meaning to feel
together or the convergence of two wills over the
same point
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 essence: conformity of the parties to the terms of the determinate effects by virtue of a certain
contract situation; basis of quasi-contracts; e.g. lapse of
 definition: the concurrence of the offer and the time given to repudiate an inheritance
acceptance over the thing and the cause which
constitute the contract.
 Requisites:4(Castan as cited by Caguioa)  Concurrence between the intention of the
(1) Plurality of subjects parties and its manifestation
(2) Capacity of the contracting parties - an absolute concurrence between what is
(3) Intention of the parties intended and what is expressed.
(4) Manifestation of the intention of the parties *Divergence of intention – when there is NO
(5) Concurrence between the intention of the parties concurrence
and its manifestation 2 types:
o conscious – when there is jovandi
 Plurality of subjects causa or mental reservation or when
- There must be at least two parties (not two there is a simulation
persons) and two declarations of will (not o unconscious – when there is an error in
two wills)5 the declaration or error substantibo
 Capacity of the contracting parties
- Refers to the legal capacity (i.e. age, mental  2 elements of consent:
disposition) of the contracting parties to (1) Offer
contract (2) Acceptance
- A valid consent presupposes legal capacity.
 Intention of the parties * Manifestation of consent  the meeting of the offer
- Must be formed and manifested in a manner and the acceptance
that is rational and conscious and should not
be vitiated by any vice which may destroy its General Rule: There must be a concurrence of the offer
character. and acceptance with respect to the object and the cause of
- 4 traditional vices of consent: the contract.
o Error Exception: Not applicable to cases where other matters
o Fraud beside the thing and the cause are considered material by
o Violence the parties, in which case, the area of agreement must
o Intimidation include those other things which are considered material by
 Manifestation of the intention of the parties the parties. (Magsaysay v. Cebu Portland Cement Co. as
- May be express, tacit, or may be presumed. cited in Caguioa)
Express consent – exists when the same is
manifested by words or by writing; the normal  Offer – a unilateral proposition which one party makes
way of manifesting consent. to the other for the celebration of a contract; or simply
Implied consent – exists when certain acts are put, a proposal to make a contract.
performed which do not directly manifest the - requisites:
consent but where the consent can be inferred 1. definite
from the conduct of the person. 2. complete
Presumed consent – is a fiction which produces 3. made with the intention to be bound
4. directed to person or persons with whom the offeror
4
According to Clarin vs. Rulona, as cited in Tolentino, the intends to enter into a contract
following are the requisites of consent: (1) plurality of
subjects; (2) capacity; (3) intelligent and free will; (4) express a. it must be definite
or tacit manifestation of the will; (5) conformity of the internal  offer is definite when an acceptance thereof will
will and its manifestation.
Jurado, on the other hand, enumerates the following as create a valid and subsisting contract.
requisites of consent: (1) consent must be manifested by the  not affected where the determination thereof is left
concurrence of the offer and the acceptance; (2) contracting to the will of the other party.
parties must possess the necessary legal capacity; and (3)
consent must be intelligent, free, spontaneous and real  e.g. “I am in a position and willing to entertain the
5
This thus gives way to the validity of auto-contracts purchase of a yacht.” >>> not an offer but a mere
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invitation to make an offer.6 person or persons with whom the offeror wishes to enter
into a contract.
Note: Definiteness is not affected where the  Exception: definite offers which are not directed to a
determination thereof is left to the will of the other party. particular person but to the public in general (examples:
Example: An offer to sell as many sacks of rice as the promises of reward, public auction)
buyer is willing to purchase but not exceeding 500 • In order for unilateral promises publicly made be
sacks at P50 per sack is a valid offer. enforced, there must be an acceptance that shall
convert it into a contract. The performance of the
b. it must be complete act for which a reward or prize is promised can
 when it indicates with sufficient clearness the kind of be considered as an acceptance.7
contract intended and definitely stating the essential
conditions of the proposed contract, as well as the non-  Acceptance – the unconditional and unqualified
essential ones desired by the offeror agreement to the offer.
 example: in a contract of sale, offer must specify the - requisites: (ADICT)
object, price and terms
1. absolute
2. directed to the offeror
c. it must be made with the intention to be bound 3. made with the intention to be bound
 the offer must be made seriously 4. made within the proper time
 examples of offers with NO intention to be bound: 5. communicated to the offeror and learned by him
 Those made for fun or jest
 Those made jocandi causa or as an a. it must be absolute
expression of courtesy - there is no variation whatsoever between the terms of
General Rule: Offers not seriously made and accepted by the offer and the acceptance.
the other party, aware of the non-seriousness of the offer, • It is necessary that the acceptance be
is null and void and cannot give rise to a contract. unequivocal and unconditional, and the
acceptance and the proposition shall be without
*If the offeree is induced to take it seriously or he any variation whatsoever; and any modification
was not aware that offer was not intentional, or variation from the terms of the offer annuls the
 act is VOID; hence there is NO CONTRACT; but he latter and frees the offeror.
may recover for damages which he has suffered by  means that the offeree should NOT desire
reason of his belief that the offer was seriously made. anything exactly than the proposed offer; his
acceptance must be for the totality of the
Exception: offer, nothing more, nothing less. Should the
*In cases of mental reservations (when a party acceptance be qualified (for example
makes a declaration but secretly and without informing the when a pure obligation is accepted with a
other party does not intend to be bound by such condition, or when a term is established or
declaration; exists when the manifestation of the will is changed, or when a simple obligation is
made by one party for the purpose of inducing the other to converted into an alternative one), the
believe that the former intends to be bound, when in fact acceptance constitutes a counter-offer
he does not) and a counter-offer has the effect of
 act is VALID; and hence may give birth to a extinguishing the offer.
contract. This is in line with the principle of estoppel b. it must be directed to the offeror
(Caguioa and Tolentino). Exception to the exception: But c. it must be made with the intention to be bound
when the other party is aware of such mental reservation, it d. it must be made within the proper time, i.e. within
will not bind the offeror. the period expressly or tacitly given
e. it must be communicated to the offeror and
d. it must be directed to the person or persons with learned by him
whom the offeror intends to enter into a contract  Unless the offeror knows of the acceptance, there
 General rule: The offer must be directed to a particular is no meeting of the minds of the parties, no real
6
Rosentoch v. Burke as cited in Caguioa, Tolentino &
7
Jurado Tolentino, 2002, p. 459.
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concurrence of offer and acceptance.8 contents, even if he is not able actually to

acquire such knowledge by reason of
 Withdrawal of offer absence, sickness or some other cause.
 Rule: Both the offer and the acceptance can be d. Cognition theory – contract is perfected from
revoked before the contract is perfected. Offeror may the moment the acceptance comes to the
withdraw his offer at any time before he learns of the knowledge of the offeror; theory followed by
acceptance, even if such acceptance has already been the Spanish Code and have been retained by
made, but not made known to him. 9 our Civil Code
 Presumption: Contract has been entered
 Lapse of Time into the place where the offer was made.
 An offer without a period must be considered as  If the offeror delays in bad faith (by not
becoming ineffective after the lapse of more than the time reading or opening the letter of acceptance
necessary for its acceptance, taking into account the although he can do so), contract must be
circumstances and social conditions. deemed perfected. [ Reason: It cannot
have been the intention of the law to leave
Media by which the acceptance has been made known the perfection of the contract to the caprice
to the offeror: of the offeror.]
1. acceptance through intermediaries10  Exception: Art.54 of the Code of
• If the intermediary is a true agent who has the Commerce  can be applied only to purely
power of binding the offeror, commercial contracts which are still
 Acceptance by the offeree made known to governed by the Code of Commerce such
the agent is binding on the offeror. as joint accounts and maritime contracts.12
• If the intermediary has no power to bind either
the offeror or the offeree, 3. acceptance by telephone or telegram
 Acceptance is not binding on the offeror until  is deemed to have been made by two
the intermediary actually informs him of the persons present and is considered to have
same. been entered at the place where the offer
2. acceptance by correspondence was made.
 4 different theories in pinpointing the exact
4. acceptance by silence
moment of perfection:
a. Manifestation theory – contract is perfected • Rule: Whether or not silence can be considered
from the moment the acceptance is declared as an expression of the will depends upon the
or made. (theory followed by the Code of circumstances for silence is in itself ambiguous.
Commerce)11 • When circumstances imply a duty to speak on
b. Expedition theory – contract is perfected from the part of the person for whom an obligation is
the moment the offeree transmits the proposed, his silence can be construed as
notification of acceptance to the offeror, as consent.
when the latter is placed in the mailbox  Requisites:
c. Reception theory – contract is perfected from a. that there is a duty on the part of the offeree
the moment that the notification of to express his refusal
acceptance is in the hand of the offeror in b. that the silence on the part of the offeree
such a manner that he can, under ordinary cannot be interpreted in any other way
conditions, procure the knowledge of its c. that there is a concurrence between the
8
effect of silence and the undisclosed will of
Art. 1319, par.2: Acceptance made by letter or telegram the offeree
does not bind the offerer except from the time it came to his
knowledge. (This rule should also apply in case of  Art. 1870-1873 – on agency; cases when
acceptance by cable or telephone according to Tolentino.) acceptance of the agency may be implied
9
Art. 1324 from silence of the agent under certain
10
Art. 1322: An offer made through an agent is accepted circumstances
from the time acceptance is communicated to him.
11
Art. 54: Contracts entered into by correspondence shall be
perfected from the moment an answer is made accepting the
12
offer or the condition by which the latter may be modified. Jurado, 2002, p.399
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 Applicable Doctrines13 • If the offeror fixes a period within which the

a. As between persons present acceptance must be made in order to become
- If the silence is entirely unconnected with effective,
any fact, there can be no contract. >>> acceptance must be made known to the offeror
before the period lapses; one made after the lapse of
b. As between persons absent the period is NOT considered an acceptance of the
- If there has been no antecedent relation offer.
between the parties, silence will not give rise • Any variation whatsoever between the manner of
to a contract. acceptance prescribed by the offeror and that offered
by the offeree constitutes a counter-offer = invalidates
 Revocation of Acceptance the offer = NO CONTRACT
 The acceptance may be revoked before it comes to
the knowledge of the offeror.
Art. 1322. An offer made through an agent is accepted
 New Contract Before Acceptance from the time acceptance is communicated to him.
 Pending the acceptance of an offer, the offeror can - See acceptance through intermediaries
perfect a contract over the same thing with another
person.
 If the first offer is not revoked by him before it is Art. 1323. An offer becomes ineffective upon the death,
accepted, he becomes liable for damages to the first civil interdiction, insanity or insolvency of either party
offeree for culpable impossibility of performance. before acceptance is conveyed.
 As between the two offerees, the one whose
acceptance perfected a contract first is given priority; the General Rule: Offer is extinguished upon the death, civil
other party has only an action for damages. interdiction, insanity or insolvency (CIDI) of either party
before acceptance is conveyed.
Art. 1320. An acceptance may be express or implied.
Cases where offer is extinguished:
Manner of acceptance 1. upon the death, civil interdiction, insanity or insolvency of
Express consent – exists when the same is manifested by either party (Art. 1323)
words or by writing; the normal way of manifesting consent. 2. upon the rejection of the offeree (Batangan v.
Implied consent – exists when certain acts are performed Cojuangco)
which do not directly manifest the consent but where the 3. upon the lapse of the period stated in the offer without
consent can be inferred from the conduct of the person. acceptance being conveyed
Presumed consent – is a fiction which produces 4. upon qualified or conditional acceptance, i.e. counter-
determinate effects by virtue of a certain situation; basis of offer (Logan v. Phil. Acetylene Co.)
quasi-contracts; e.g. failure on the part of the heir to reject 5. upon revocation of the offer before knowledge of
the inheritance within 30 days from notice of the order of acceptance (Art. 1324)
the court distributing the estate
Art. 1324. When the offerer has allowed the offeree a
Art. 1321. The person making the offer may fix the certain period to accept, the offer may be withdrawn at
time, place, and manner of acceptance, all of which any time before acceptance by communicating such
must be complied with. withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
Contents of the offer
 offeror must make the offer complete and definite in Rule: The offeror may always withdraw the offer before
order that acceptance of the same may constitute a binding acceptance
agreement • In cases of arbitrary revocation, i.e. revoking
the offer without just cause, offeror may be held
13
Above principles have been developed in French liable for damages.14 But still, there will be NO
jurisprudence and have been recognized as acceptable
14
doctrines according to Tolentino (Tolentino, 2002, p.456) Based on the principle of abuse of right; Art. 19, NCC:
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BINDING agreement between parties as there (1) Unemancipated minors;

was NO LEGAL OFFER upon withdrawal. (2) Insane or demented persons, and deaf-mutes
who do not know how to write.
Option Contracts
- an agreement whereby one party concedes to Legal Effects of entering into contracts by parties
the other, for a determinate period, and under fixed without legal capacity:
conditions, the power, which is left to his sole will, to • If both parties cannot give consent = CONTRACT
decide whether a principal contract will be celebrated. IS UNENFORCEABLE16
- Where the offeror grants to the other party a • If only one of the parties is incapable of giving
period within which to accept the offer or not consent = CONTRACT IS VOIDABLE17
- Requisites:
a. concession by one party in favour of the other of the
power to decide whether a contract will be celebrated
Art. 1330. A contract where consent is given through
or not, without any obligation on the part of the latter
mistake, violence, intimidation, undue influence, or
b. concession is exclusive
fraud is voidable.
c. concession is for a fixed period
d. there is no other condition but the sole will of the
Characteristics of consent:
other
• Intelligent
 General Rule: Offeror still have the right to withdraw • Free and voluntary
offer before knowledge of acceptance. If acceptance has • Spontaneous
been communicated and learned by the offeror, then there • Real
is meeting of the minds and therefore offer CANNOT be
withdrawn. Vices of consent:
Exception: In case of option contracts where the same are  Mistake
not supported by an independent consideration distinct - should refer to mistake of fact and not of law.
from the price. - must refer to the very substance of the thing (if error
Illustration: Art. 147915 (Even though the unilateral refers to the nature of the contract, contract is VOID)
promise to buy or to sell has already been accepted, it can - must refer to the essential or substantial conditions of the
still be withdrawn by the offeror if the accepted unilateral contract in order to vitiate consent
promise (option contract) is not supported by any - requisites:
consideration distinct form the price.) 1. it must be of a past or present fact
2. mistake must have induced the consent
3. mistake must not be imputable to the party mistaken, i.e.
Art. 1325. Unless it appears otherwise, business mistake is not inadvertent and excusable
advertisements of things for sale are not definite 4. mistake must be of fact and not of law
offers, but mere invitations to make an offer.
 Violence
Art. 1326. Advertisements for bidders are simply - refers to physical force or compulsion
invitations to make proposals, and the advertiser is not - there is violence when in order to wrest consent, serious
bound to accept the highest or lowest bidder, unless or irresistible force is employed
the contrary appears. - requisites:
1. force employed is serious or irresistible
Art. 1327. The following cannot give consent to a 2. it is the determining cause of consent
contract: 3. it is not justified
4. it is sufficient
Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith.  Intimidation
15
Art. 1479: A promise to buy or to sell a determinate thing - when one of the contracting parties is compelled by a
for a price certain is reciprocally demandable. reasonable and well-grounded fear of an imminent and
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the 16
promissor if the promise is supported by a consideration Art. 1403:
17
distinct from the price. Art. 1407
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grave evil upon his person or property, or upon the person 2. it must be serious
or property of his spouse, descendants or ascendants to 3. it must be employed by one of the contracting parties
give his consent and not by a third person
- requisites: 4. it must not be employed by both contracting parties
1. it must produce a reasonable and well-grounded fear 5. it must have induced the consent of the other party
 when the person issuing the threat appears able to 6. it must be made in bad faith, i.e. with knowledge of its
inflict the harm threatened falsity
 in order to determine this, it is required that the age, sex
and condition of the persons be borne in mind. Non-fraudulent cases:
2. fear must produce the consent • Not every silence or concealment will constitute fraud. If
 the fear produced by the same must be the direct and the concealment does not refer to material facts, i.e.
the determining cause which compelled the consent to be those that induce consent, it will not be fraudulent.
given. (Art.1339)
3. fear is of imminent and grave evil upon person and • The usual exaggerations in trade (are said to be lawful
property misrepresentations known as dolus bonus), when the
 evil threatened must be serious or grave and imminent. other party had an opportunity to know the facts, are not
4. threat must be unjust in themselves fraudulent. (Art. 1340)
 if the means threatened to be used to inflict the evil or • A mere expression of opinion does not signify fraud,
harm is unlawful or illegal or there is no right to inflict the unless made by an expert and the other party has relied
injury feared on the former’s knowledge. (Art. 1341)

 Undue Influence Art. 1345. Simulation of a contract may be absolute or

- when a person takes advantage of his power over the will relative. The former takes place when the parties do
of another, depriving the latter of a reasonable freedom of not intend to be bound at all; the latter, when the
choice parties conceal their true agreement.
- to determine whether the influence exerted is
unreasonable, the following circumstances shall be SIMULATION  is the declaration of a fictitious intent
considered: manifested deliberately and in accordance with the
1. confidential relations agreement of the parties in order to produce for the
2. family relations purpose of deceiving others the appearance of a transation
3. spiritual relations which does not exist or which is different from their true
4. other relations between the parties agreement.
 requisites:
 Fraud 1. A deliberate declration contrary to the will of the
- when through insidious words or machinations of one of parties
the contracting parties, the other is induced to enter in to a 2. Agreement of the parties to the apparently valid
contract which, without them, he would not have agree to. act
- refers to deceit or fraud in the celebration of contract 3. The purpose is to deceive or to hide from third
- any kind of deception and includes words, machinations, persons although it is not necessary that the
false promises, exaggerations of hope and benefits, abuse purpose be illicit or for purposes of fraud
of confidence, fictitious names, qualifications or authority.
- 2 kinds of deceit:  2 types:
a. dolo causante (substantial fraud) – that which affects the a. absolute – when the parties do not intend to be
substance of the agreement so that without it the party bound at all
would not have consented b. relative – when the parties conceal their true
b. dolo incidente (incidental fraud) – that which affects, not agreement
the substance but the incidentals of the agreement, so that
without it the party would have consented but under Effects of Simulation
different terms. If simulation is absolute = NO CONTRACT
- requisites: If simulation is relative = VALID CONTRACT unless it
1. there must be a misrepresentation or concealment of a prejudices a third person or has an illicit purpose
fact
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Section 2 – Object of Contracts

Object of a contract  the subject matter; the

prestation which is the subject matter of the obligation
arising from the contract
 requisites:
a. object must be real or possible (it exists at the
moment of the celebration of the contract, or at least
capable of existing thereafter)
b. it is licit (it is not contrary to law, morals, good
customs, public order, public policy)
c. it must be determinate or susceptible of
determination (the kind and quantity may be
determined without the aid of a new contract between
the parties)

Section 3 – Cause of Contracts

Cause  the essential or more proximate purpose

which the contracting parties have in view at the time
of entering into the contract (Manresa); the fact which
explains and justifies the creation of an obligation by
the will of the parties (Castan);
 the reason, end or purpose of the obligation
 requisites:
1. it must exist
2. it must be real
3. it must be lawful

Art. 1354. Although the cause is not stated in the

contract, it is presumed that it exists and is lawful,
unless the debtor proves the contrary.

Presumption: Even if the contract does not state a cause,

the law presumes that one exists and that the same is
lawful and hence it is incumbent on the party impugning the
contract to prove the contrary.

Art. 1355. Except in cases specified by law, lesion or

inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue
influence.

Lesion  any damage caused by the fact that the price is

unjust or inadequate.

General Rule: The mere fact the cause is unjust or

inadequate does not invalidate the contract.
Exception: Unless there is fraud, mistake or undue
influence.
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CHAPTER 3
FORM OF CONTRACTS